US Dollar Index looks for direction around 98.00 ahead of data
- DXY alternates gains with losses around the 98.00 mark.
- Risk-on sentiment prevails at the end of the Asian session.
- US Retail Sales, Industrial Production next of relevance.
The US Dollar Index (DXY), which tracks the buck vs. a bundle of its main rivals, is trading without any clear direction on Tuesday around the 98.00 mark.
US Dollar Index focused on COVID-19, data
The index is looking to regain some traction following the negative start of the week, s investors remain cautious and major central banks continue to pump in more stimulus into the system in order to fight the impact of the coronavirus on the global economy.
The DowJones had its worst session since 1987 on Monday despite the Federal Reserve reduced the Fed Funds Target Range (FFTR) by 100 bps to 0.0%-0.25% on Sunday. The Fed’s move on rates adds to last week’s first in-between rate cut by 50 bps and the subsequent injection of trillions of dollars to the system.
In the meantime, developments around the coronavirus are expected to keep driving the sentiment in the global markets for the time being against the backdrop of unremitting efforts from countries to curtail the contagion.
Later in the US docket, February’s advanced Retail Sales are due seconded by Industrial Production figures for the month of January, Capacity Utilization, the NAHB index, JOLTs Job Openings and Business Inventories.
What to look for around USD
DXY staged a strong recovery from last week’s lows in the 94.60 region, although it met solid resistance in the vicinity of 98.90 so far. Markets’ focus remains on the developments from the COVID-19 and its impact on the global economy amidst (now) looser monetary policy conditions. In the meantime, market participants continue to adjust to the recent measures by the Federal Reserve, while the outlook on the dollar stays constructive after regaining the area above the 200-day SMA. This outlook is also reinforced by the “good shape” of the domestic economy, the buck’s safe haven appeal and its status of “global reserve currency” and store of value.
US Dollar Index relevant levels
At the moment, the index is gaining 0.12% at 98.11 and a breakout of 98.81 (weekly high Mar.13) would open the door to 98.93 (high Aug.1 2019) and finally 99.37 (high Sep.3 2019). On the flip side, immediate contention is seen at 97.45 (low Mar.16) seconded by 97.26 (50% Fibo of the 2017-2018 drop) and then 96.36 (monthly low Dec.31 2019).